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Development drilling occurred in a number of properties to maintain or increase production. Plant expenditures were concentrated in Caroline to increase throughput and processing capacity at the plant. Total reserve replacement costs for 1997 were $5.43 per barrel of oil equivalent based upon total capital expenditures of $97.7 million (excludes $5.0 million for expected Alberta Royalty Tax Credit from the acquired properties) and total reserve additions and revisions of 18.0 million barrels of oil equivalent which reflects the Manager’s view of reserves for our acquisitions.
General and Administrative Expenses ($000s except $/Boe)
General and administrative expenses
1997
1996
2,735
652
Residual 1 percent of income retained by the Trust
(377)
(184)
Net general and administrative expenses Per Boe
2,358 $
0.69
468 $
0.34
Management Fees
ARC Financial, as Manager of the Trust, receives a management fee of three percent of net operating revenue which equaled $1,351,000 or $0.39 per barrel of oil equivalent in 1997 bringing the total G&A and management fee costs for 1997 to $1.08 per barrel of oil equivalent. In 1996, total management fees were $628,000 for the six month period.
Capital expenditures were financed by equity and debt. Equity financings raised $80 million of gross proceeds. The Trust utilized a portion of its $100 million line of credit to finance the remaining portion of the 1997 capital program. At year end, bank debt stood at 18.6 percent of the Trust’s total capitalization which is a reasonable level considering the low risk, long life nature of the assets.
Interest Expense
Interest expense increased to $2.1 million for 1997 up from the six month period in 1996 as shown below: Interest expense ($ thousands)
1997
1996
2,109
920
52
38
4.1%
4.8%
Long Term Debt 1997
1996
Bank debt
65,955
37,998
Working capital (including cash)
(4,647)
(1,647)
Capital and Deferred Taxes
Net obligations
61,308
36,351
Capital taxes are paid by ARC Resources and are based on debt and equity levels at the end of each quarter.
Current year cash flow (annualized)
37,757
36,630
Average debt outstanding ($ millions) Average interest rate
Capital taxes ($ thousands)
1997
1996
137
62
($ thousands)
Payout period (years) Net obligations
unitholders’ equity* Total capitalization
267,562
220,500
328,870
256,851
Debt as a percentage of
The Trust closed two major and five minor transactions in 1997. The minor transactions involved swaps or dispositions in five producing areas in order to enhance the Trust’s oil and gas reserve base and reduce the number of non-core properties.
total capitalization
1997
1996
857
109
74
–
18.6%
14.2%
* Based on December 31, 1997 and 1996 unit closing prices of $10.45 and $12.25 respectively
During the year, the bank line of credit for ARC Resources was increased from $60 million to $100 million, resulting in an unutilized line of credit of approximately $34 million as of December 31, 1997.
Capital Expenditures
Lease rentals and acquisition
1.0 36,351
Market value of
Liquidity and Capital Resources
($ thousands)
1.6 61,308
Geological and geophysical expenditures Development drilling Plant and facilities Producing property acquisitions, net Total capital
7,362
116
462
977
93,962
206,231
102,717
207,433
Depletion, Depreciation and Future Site Reclamation Expenses
The 1997 depletion and depreciation rate was $5.70 per barrel of oil equivalent, based on a 6:1 energy equivalent factor, compared to the 1996 rate of $5.54 per barrel of oil equivalent. This rate 21